Recently, I’ve noticed that many people have been discussing “bottom-fishing” stocks, and I’ve found that many of them misunderstand this strategy. Bottom-fishing isn’t about gambling on whether today is the absolute lowest point—it’s about finding the range where “the selling pressure has basically exhausted, the downside risk is limited, and there’s a chance for a short-term rebound.”

From my own observations of many cases, I’ve found that targets that truly succeed with bottom-fishing need to meet several conditions at the same time. First, there must be trading momentum—meaning the stock should have experienced relatively large volatility over the past period, trading volume shouldn’t be too quiet, especially after a big drop triggered by a negative news event. If a stock basically has no one trading it, then no matter how cheap it is, it’s difficult to profit from short-term price spreads.

Second is the need for rebound potential. For this part, I look at both the technical side and the fundamental side. On the technical side, I watch whether the stock price forms patterns like a V-shaped bottom or a double bottom, or whether indicators such as RSI and KDJ show oversold conditions. On the fundamental side, I judge whether the negative news has already been digested by the market. Sometimes you see a “negative news that doesn’t lead to a decline,” and that is a signal.

Let’s take META in 2022 as an example. Back then, after the earnings report was released and losses in the metaverse sector came in worse than expected, the stock gapped down and fell sharply. But interestingly, after it dropped, the stock price was unable to make new lows—each rebound got pushed back down by shares trapped in the market. At that point, I wouldn’t rush to enter. I would wait until two conditions appear: the selling pressure gradually dulls, the stock no longer makes new lows, and a new wave of upward momentum shows up and successfully breaks through the previous rebound high. Entering here may not be the absolute bottom, but it’s relatively much safer.

When it comes to judging timing, I usually start by looking at the big picture. For example, I observe the slope of medium- and long-term moving averages. If the 6-month moving average (such as the 120-day moving average) is still trending upward, then a short-term pullback is more like a pullback within a bull market—essentially a “buy-the-dip” opportunity in an uptrend. But if the moving averages start to flatten or turn downward, it means you may be entering a bear market. At that point, using the same bottom-fishing strategy will noticeably reduce your win rate.

During the period from 2023 to 2024, when the bullish trend was clearly dominant, I used a simple strategy: when the index pulls back to around the lower edge of the Bollinger Bands, I set up positions at the dip; when it rebounds to the upper band or your profits reach about 2.5%, I take profit first. If the decline after entry exceeds 1%, I strictly cut losses. Paired with this discipline, the success rate of short-term bottom-fishing is actually quite good.

But here’s the key point: bottom-fishing is essentially a short-term operation, not something intended to hold for three years as a long-term investment. So before entering, I set my take-profit and stop-loss points in advance. Generally speaking, I exit if I’m down 1 to 2% before entry, I stop taking profit if gains exceed 5 to 7%, or if the stock doesn’t break the previous high. It sounds strict, but in the long run, as long as every loss is controlled to a small amount and you can capture 5 to 7% gains each time, even if not every trade is successful, the overall expected value can still remain positive.

I’ve also observed investors who use leveraged instruments to do bottom-fishing. Since short-term bottom-fishing targets might only offer a profit of a few percent, without amplifying the position size, the contribution to your overall assets is limited. That’s why many people combine futures or contracts for difference (CFD) instruments, using less capital to build a larger position. Individual stocks are often leveraged 3 to 5 times, and indices—because their volatility is relatively smaller—can use even higher leverage.

Finally, what I want to say is this: what truly determines your profit or loss isn’t occasional “miracle trades,” but whether you can execute every time according to stop-loss/stop-profit and capital management rules. Bottom-fishing may look simple, but doing it well requires discipline and patience. I recommend that if you want to practice this approach, you start with simulated trading—limit yourself to stocks with clear negative news and technical signs of a possible bottom. After you’re familiar with it, then move into live trading. Only then can you truly master the rhythm of bottom-fishing.